Crowdstrike, My Take on Results

I promised that I would try to write up Crowdstrike this weekend. Here it is. I thought the company is doing phenomenally.

Let me start with a few paraphrased quotes from the CEO:

The competitive landscape is the best I have seen in my 27-year career. We believe this is the beginning of a multi-year trend as being driven by the industry consolidation that took place last year along with the seismic shift to cloud technologies.

We are landing bigger with more modules and increasing the number of new customers that start with ARR over $1 million.

With our cloud native platform, our lightweight agent that is easily deployed at scale, and our frictionless go-to-market engine, we are uniquely positioned to meet their cybersecurity needs
The seismic shift to cloud native technologies and cloud workloads has created an environment with massive greenfield opportunities. While our competitors are distracted trying to integrate acquired technologies, rationalizing their workforce or retooling their on-prem offerings, our mission, platform and brand are clearly resonating with customers and partners.

Furthermore, as Broadcom began integrating Symantec, we saw an increase in inquiries among both customers and partners. These dynamics have contributed to an expansion in our pipeline. We have seen significant demand as our partners try to protect customers who are left searching for alternatives as Symantec abandons large segments of the market. Several partners have launched Symantec replacement campaigns. We are closely collaborating with them. One of our partners submitted a list of several thousand of their customers that will be migrating away from Symantec in the next year and we found that there was very little overlap between these prospects and our existing customer base.

Saul here: while other companies brag about increasing their number of customers by 30% per year, Crowdstrike increased theirs by over 100%!!!

Within new enterprise customers, we are landing bigger with more modules and in this quarter we more than doubled the number of new customers starting out with greater than $1 million of ARR compared to a year ago. Additionally, across all new customers, the average number of modules increased every quarter this past fiscal year.

We also continued to expand module adoption within our existing customer base. This quarter, the percent of our customers with four or more modules once again increased, and those using five or more cloud modules grew to one-third of our customer base.

As we add new modules after the first module is sold to a customer, virtually every other module after that is pure gross margin!!!

Saul here: they also point out that companies using more of their modules obviously deepens their relationship with the companies and makes them more sticky.

As far as the impact of the coronovirus, Crowd was built to thrive with a remote workforce. Even in normal times 70% of their workforce is remote. They use Zoom.

Also as their customers and potential customers have more and more people working remotely they need more end point security. Crowd has seen a 13% increase in initial appointments since the pandemic. The people their salesmen need to contact aren’t so busy in the office, but are at leisure, more or less, at home and more willing to take time and talk.

They point out that they are all in the cloud while with the pandemic it’s even harder ard to set up these on-premise systems that their competitors have, and especially to service customers whose people are working remotely.

Now quarter results, very summarized

ARR was $601 million, up from $313 million a year ago, and from $502 million sequentially. It was up 20% sequentially, which was up from 18% sequentially the quarter before, which was up from 16% sequentially the quarter before that. In other words it was reaccelerating.

Revenue was up 89%. Subscription revenue was up 90%, and was 91% of revenue.

Now the GOOD stuff:

Subscription gross margin was 77%, up from 70% a year ago.

Operating Cash Flow was $66 million, up from $16 million a year ago. (That’s not a misprint). Operating cash flow margin was 43% !!!

(For the year it was $100 million, improved from a LOSS of $23 million a year ago)

Free Cash Flow was $50 million, up from $0 million a year ago.

Free Cash Flow margin was 34% !!!

Net Profit Margin was -3%, improbed from -35% a year ago!!!

Growth in subscription customers was 116% !!!

You can see why I was trying to buy all I could.



Like muji, I may have worn out my exclamation point key on this one!